Credit card company promises fee cap, full disclosure of interchange rates
By Steve Holtz
PURCHASE, N.Y. -- A new initiative by MasterCard might save retailers a few bucks in the near future, but the company’s plan to establish a fee cap “of about $50 or more” for gasoline retailers won’t likely resolve the issues convenience store retailers face regarding credit card fees.
With a goal of “maximizing the value of MasterCard card acceptance,” Purchase, N.Y.-based MasterCard announced that it will soon implement the “significant interchange initiatives aimed at addressing concerns that have been raised by the merchant community,” the company said in a press release.
These initiatives include publishing all the MasterCard interchange rates that apply to U.S. merchants and establishing the cap on interchange fees on fuel purchases at petroleum retailers, a segment of the retail population that has been very vocal in contesting the fees at industry events and during congressional hearings, where antitrust concerns have been raised. A number of retail groups, including the National Association of Convenience Stores (NACS), have filed class-action suits against MasterCard, Visa USA and a number of major banks over interchange fees. The suits target the fees, which are paid by merchant banks to card-issuing banks. The merchants pay those fees indirectly as a component of fees charged to them by their banks.
“Consumers and merchants as well as MasterCard and its customers all benefit from a strong, competitive payments industry,” said Walt Macnee, president of the Americas for MasterCard. “One of my key goals is to enhance our ability to deliver value to merchants across the region.… Among the things merchants have told us they want is additional transparency around interchange rates and that because of the unique structure of the petroleum distribution business, gasoline retailers are disproportionately affected by high oil prices.”
Attempts to reach Bill Douglass, president of Douglass Distributing, and Hank Armour, NACS chairman, both of whom have testified before Congress on credit card issues, for comment on the initiatives were unsuccessful; however, it seems MasterCard is looking to smooth some rough edges in its relationship with retailers.
“We have heard the merchant concerns loud and clear,” said Joshua Peirez, group executive of global public policy for MasterCard. “We were the first in the industry to publish our merchant rules and procedures on our website, making them available free of charge or restrictions to any merchant who wants to access them. Merchants have since told us they would like us to publish our U.S. interchange rate schedule, and we are making a commitment to them that we will post the rates on our website on or before Nov. 1, 2006.
Peirez pointed out, however, that “interchange is only one component of the discount rate merchants pay for acceptance. Discount rates are set by the acquiring banks and independent service organizations that provide MasterCard acceptance to merchants. The merchant community believes that having access to our rate schedule will provide additional transparency to the process, so we are pleased to be able to accommodate their request.”
When published, the interchange rate schedule will be available at www.mastercardmerchant.com, where merchants can now access the MasterCard rules manual. The site also provides information to help merchants leverage card acceptance for their businesses.
“Similarly, merchants have told us that interchange fees on rapidly rising gasoline prices are a significant concern to them,” Peirez said. “MasterCard understands this concern. We believe that putting a cap on interchange fees when consumers use their MasterCard cards for gasoline purchases will benefit all gasoline retailers, as well as consumers who recognize that their purchases are faster and more convenient when they use their MasterCard cards at the pump. The cap will apply to consumer credit and debit cards and will provide benefits to gasoline retailers on credit-card transactions of about $50 or more. For example, on a $60 gasoline transaction, the reduction in interchange could be as much a 21%.”
“We have very few transactions that are over $50,” said Bill Walljasper, vice president and CFO of Casey’s General Stores, Ankeny Iowa.
Walljasper was asked about MasterCard’s new proposal, announced yesterday, during Casey’s quarterly earnings conference call. After noting “a 47% increase in credit card fees related to more expensive gasoline” compared to the previous year, Walljasper said simply, “Well over the majority of our transactions are below the $50 mark.... There’d have to be a substantial gas purchase to have that.”
Reacting to MasterCard’s moves, Visa said in an emailed statement to P-I News Services that there is "full visibility" within the company's pricing, adding that it will "continue to seek opportunities to increase clarity into all parts of our business and strengthen the organization's structure."
[Source: Convenience State News]
